US FINANCIAL MARKET
Wall Street Says CPI Not a ‘Game Changer’ for Fed: Markets Wrap – Bloomberg, 9/13/2023
- Stocks, bonds and the dollar saw small moves, with a mixed inflation report reinforcing speculation the Federal Reserve will pause its rate hikes — but refrain from calling the end of its tightening cycle.
- The S&P 500 was little changed.
- Megacaps were mixed, with the chiefs of five of the 10 biggest US companies appearing at a closed-door Senate meeting to shape how artificial intelligence is regulated.
- Apple fell as China flagged security problems with iPhones.
- American Airlines Group led industry losses after cutting its earnings outlook amid a jump in jet fuel prices.
- Arm Holdings’s long-anticipated initial public offering is set to price Wednesday.
- Treasury two-year yields hovered near 5%. The greenback wavered.
- Swaps tied to the next two Fed policy meetings continued to price in little chance of a rate increase next week — and about 50% odds of one in November.
- Measures of credit-default swaps for both investment and speculative-grade companies slid — suggesting bets on a pause from the Fed supersede economic worries for now.
- The so-called core consumer price index, which excludes food and energy costs, advanced 0.3% from July, the first acceleration in six months.
- From a year ago, it increased 4.3% — in line with estimates and marking the smallest advance in nearly two years.
- The Stoxx Europe 600 fell 0.3%.
- The Bloomberg Dollar Spot Index was little changed.
- The yield on 10-year Treasuries was little changed at 4.27%.
- West Texas Intermediate crude fell 0.1% to $88.75 a barrel.
- Gold futures were little changed.
American Airlines Cuts Profit View as Pilots’ Contract Weighs on Bottom Line – Wall Street Journal, 9/13/2023
- American Airlines slashed its profit outlook for the current quarter, citing its new labor contract with its pilots’ union and higher fuel prices.
- The company said Wednesday that it expects to post adjusted earnings of 20 cents to 30 cents a share for the third quarter, down from the outlook provided in July for adjusted earnings of 85 cents to 95 cents a share.
- The company said its collective-bargaining agreement with pilots represented by the Allied Pilots Association resulted in a retroactive pay expense of about $230 million, which will be recognized in the third quarter.
- That will cut profit by about 23 cents a share.
- The rest of the cut to guidance is caused by higher fuel costs, which the company said have risen considerably since July.
- American Airlines expects to pay an average of $2.90 to $3.00 a gallon for jet fuel in the third quarter, up from $2.55 to $2.65 a gallon.
- American Airlines also said it expects capacity, which measures how much the company flew, to be 6% to 7% higher in the third quarter than a year earlier.
- That is at the high end of the company’s previously issued outlook.
- Revenue per available seat mile, though, is expected to fall by about 5.5% to 6.5%, at the low end of the company’s previous expectations.
Apple unveils iPhone 15 Pro with titanium case, holds line on prices – Reuters, 9/13/2023
- Apple launched a new series of iPhones that included a new titanium shell, a faster chip and improved video game playing abilities.
- The biggest surprise with the iPhone 15 that will come out Sept. 22: It did not raise prices, reflecting the global smartphone slump.
- Both the Pro and other iPhone 15 models will have a brighter display and a 48-megapixel camera as well as 100% recycled cobalt in their batteries.
- Apple said the iPhone 15’s satellite connectivity can now be used to summon roadside assistance.
- Apple said that USB-C charging cables are coming to both its iPhone 15 and the charging case of its AirPods Pro devices.
- The Pro’s use of titanium makes it lighter and stronger than previous models of other metals.
- While Apple avoids the terms artificial intelligence, or AI, the technology was the driver of several new features.
- Apple also showed off new watches, including a Series 9 Watch with a feature called “double tap” where users tap thumb and finger together twice, without touching the watch, in order to perform tasks like answering a phone call.
- It uses machine learning to detect tiny changes in blood flow when the user taps their fingers together, freeing up the other hand for other tasks like walking a dog or holding a cup of coffee, said Apple Chief Operating Officer Jeff Williams.
- The outdoor sports-focused Apple Watch Ultra 2 has new features for cycling and diving and what Apple said is the brightest screen it has ever made.
- The Series 9 will start at $399 and the Ultra 2 watch will start at $799 and be available Sept. 22.
- Apple made its effort to become carbon neutral by 2030 a focus of the event, including launches of lower-carbon watches.
Citigroup CEO Jane Fraser Is Shaking Up Executive Ranks – Wall Street Journal, 9/13/2023
- Citigroup Chief Executive Jane Fraser is shaking up the bank’s upper management levels, shedding layers and overlapping roles in her latest bid to simplify the sprawling organization.
- The bank said Wednesday it will get rid of its longstanding split into two divisions and eliminate the international layer overseeing global regions.
- Simplifying Citigroup has been a top goal for Fraser since she took over the bank in early 2021.
- Fraser, like her predecessor, Mike Corbat, has shed several businesses, including Fraser’s move to get rid of international consumer businesses.
- “We need the leaders of our five businesses at my table, fully engaged in how we operate the firm and in the critical decisions we make every day,” Fraser wrote in a memo to employees Wednesday.
- “We need a structure with fewer layers and clearer, more direct lines of decision making.”
- The five businesses for Citi are: services (treasury and custody work for big clients); markets; banking (investment banking, corporate and commercial banking); consumer banking; and wealth management.
- Citi is launching a search for the head of the banking unit. The other units will be led by their current bosses.
Ford Hires New CMO Away From Toyota as It Pivots Toward Electric Vehicles – Wall Street Journal, 9/13/2023
- Ford Motor hired a new global chief marketing officer away from rival Toyota as the automaker contends with a costly and slower-than-expected shift toward electric vehicles, as well as a potential strike by thousands of unionized workers.
- Lisa Materazzo succeeds Suzy Deering, who left the Dearborn, Mich.-based company late last year after two years in the role.
- Materazzo spent nearly 20 years at Toyota during two stints at the Japanese automaker, where she most recently led North American marketing.
- In attempting to win a larger portion of the hypercompetitive EV market, Ford is in effect competing with its own traditional combustion engine auto business, whose profits have funded the EV transition as the company attempts to transform existing customers to EV buyers, according to Nigro.
- “In some respects, they’re trying to take business away from the combustion side of Ford,” he said.
Moderna Rises on Positive Results From Flu Vaccine, and Other Plans to Move Beyond Covid – Barron’s, 9/13/2023
- Moderna stock was rising Wednesday after the vaccine maker released positive results from a Phase 3 trial of its mRNA flu vaccine and provided insight on its plans for other vaccines targeting cancer and other diseases.
- Moderna said Wednesday that its flu vaccine, mRNA-1010, met its primary endpoint in a recent late-stage trial.
- “With today’s positive Phase 3 flu results, along with previous results in Covid and RSV, we are now three for three on advancing respiratory disease programs to positive Phase 3 data,” Chief Executive Stéphane Bancel said in the news release.
- The data were released as the company works toward expanding its pipeline now that Covid-19 vaccine demand decreases.
- The company said Wednesday that it plans to begin a second Phase 3 trial, with partner Merck, of mRNA-4157 for non-small cell lung cancer later this year.
- Investors can expect updates on that trial in the company’s fourth quarter.
Blackstone Names New Credit Boss in Bid to Be $1 Trillion Lender – Bloomberg, 9/13/2023
- Blackstone made sweeping changes atop its credit unit as the private equity giant seeks to become a bigger lending powerhouse.
- The firm is consolidating groups that invest in corporate credit and asset-based finance as well as a business that manages money for insurers under one chain of command.
- It promoted insurance chief Gilles Dellaert, 44, to lead the combined unit overseeing almost $300 billion of assets — and set a goal to grow total credit assets to $1 trillion within a decade.
- In a changing of the guard, credit head Dwight Scott, 60, will become chairman of the business.
- He’ll focus on key clients, the strategy for the division’s operations in Europe and formulating other initiatives.
- The firm announced the changes to partners on Tuesday.
- The firm’s leaders predict that credit, which now accounts for about a third of assets under management, will grow faster than other business lines.
No-Show Workers Add Wrinkle to Stellantis Union Contract Talks – Bloomberg, 9/13/2023
- Shawn Fain, the president of the United Auto Workers, and Carlos Tavares, CEO of Jeep maker Stellantis, agree on at least one thing: The auto giant has a hard time getting some US factory workers to show up for their shifts.
- Stellantis has made fixing absenteeism a priority in contract talks with the UAW for its 43,000 unionized workers.
- The absentee rate at its US plants was 23% last year, according to a copy of the company’s initial contract proposal reviewed by Bloomberg.
- Just counting unplanned absences, the number is 11%, according to a person familiar with the matter.
- Absent workers led to $217 million in lost sales in 2021 and 2022, the company estimated.
- The current UAW contract expires on Thursday.
- Stellantis wants to link raises and profit-sharing payouts to attendance and make paid sick days count against vacation time, according to its opening proposal.
Starlink Surges But Still Isn’t Meeting SpaceX’s Goals, Documents Show – Wall Street Journal, 9/13/2023
- SpaceX’s satellite-internet division has outpaced rivals, generated surging revenue and played a pivotal role in Ukraine.
- The business still has a long way to go before living up to Chief Executive Elon Musk’s ambitions.
- Starlink, which relies on a satellite fleet to provide high-speed internet connections, reported $1.4 billion in revenue for 2022, according to recent documents viewed by The Wall Street Journal—up from $222 million the year before.
- The company had predicted the business would be bigger by now: A 2015 presentation SpaceX used to raise money from investors, viewed by the Journal, projected the division the company would later call Starlink would generate almost $12 billion in revenue and $7 billion in operating profit in 2022.
- SpaceX is best known for blasting off rockets, but Starlink is key for the company’s plan to one day send humans to Mars.
- Investors in the company have said they are also watching Starlink closely because it undergirds much of SpaceX’s roughly $150 billion valuation and could one day go public, according to comments Musk has made in the past.
- Toward the end of last year, Starlink had more than one million active subscribers, SpaceX has said.
- The company thought its satellite-internet business would have 20 million subscribers as 2022 closed out, according to SpaceX’s 2015 presentation.
A 3% Mortgage Rate in a 7% World? This Startup Says It Can Do That – Wall Street Journal, 9/13/2023
- There are millions of outstanding mortgages with a 3% interest rate.
- A new startup says it can help today’s home buyers get their hands on them.
- Roam, a real-estate company set to launch Wednesday, is betting that it can popularize an obscure workaround.
- “Assumable loans” allow sellers to transfer their own mortgage loans to the buyer alongside the house.
- Some 22% of active mortgages are part of the government programs that have assumption features, according to the mortgage-data and technology company Black Knight.
- Few consumers know about the option, and fewer still follow through with it.
- The FHA has processed 3,349 assumptions in the fiscal year that ends Sept. 30, up from 2,566 in the year prior.
- Raunaq Singh, Roam’s founder and chief executive officer, says his new company will find and advertise home listings attached to attractive assumable mortgages.
- It is initially launching in Georgia, Arizona, Colorado, Texas and Florida.
- The company aims to help with the paperwork and other bureaucratic hoops.
- An assumable transaction doesn’t replace an old mortgage with a new one, but instead transfers the old mortgage to the new owner.
- Roam will collect a fee from the buyer that equals 1% of the purchase price.
EY Unveils Fruits of $1.4 Billion Artificial-Intelligence Investment – Wall Street Journal, 9/13/2023
- Consulting firm EY said it recently completed a $1.4 billion investment into artificial intelligence, the latest among a series of peers to make a billion-dollar announcement regarding the rapidly developing technology.
- In addition to the $1.4 billion investment, announced Wednesday, the professional-services company said it has created its own large language model, EY.ai EYQ, and that it would train its 400,000 employee workforce on AI.
- EY declined to comment on the exact amount it would spend on AI going forward, but said that the amount is more per year than it has spent over the past five years. Future investment includes continuing to refine its large language model.
- The EY.ai platform unveiled Wednesday includes new and existing EY products that now have AI embedded in them, such as EY Fabric, which helps companies manage their data, according to the company.
- It also has a library of use cases that essentially provide a path for how companies can safely and effectively deploy AI at scale, EY said.
US ECONOMY & POLITICS
US Core CPI Picks Up, Keeping Another Fed Hike in Play This Year – Bloomberg, 9/13/2023
- Underlying US inflation ran at a faster-than-expected monthly pace in August, leaving the door open for additional interest-rate hikes from the Federal Reserve.
- The so-called core consumer price index, which excludes food and energy costs, advanced 0.3% from July, marking the first acceleration since February, Bureau of Labor Statistics data showed Wednesday.
- From a year ago, it increased 4.3%, in line with estimates and marking the smallest advance in nearly two years.
- Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI.
- That measure rose 0.6% from the prior month, the most in over a year and reflecting higher energy prices.
- Gasoline costs accounted for over half of the advance in the overall measure in August, according to BLS.
- The advance in the CPI was supported by higher costs for rent, air travel and motor-vehicle insurance, which rose the most annually since 1976.
- New-car prices rose for the first time in five months.
- Costs declined for used cars and admissions to concerts and movies.
- Shelter prices, which are the biggest services component and make up about a third of the overall CPI index, increased 0.3%, the smallest gain since early last year and dragged down by hotel stays.
- A moderation in housing costs is an essential feature for a sustained downward trend in core inflation.
- Excluding housing and energy, services prices rose 0.4% from July, the fastest in five months, and 4% from a year ago, according to Bloomberg calculations.
- So-called core goods prices, which exclude food and energy commodities, fell for a third month.
- Inflation-adjusted wages rose 0.5% from a year earlier, marking a second month of decelerating earnings growth, a separate report showed Wednesday.
Tech Titans Look to Lobby Washington on AI—In Different Directions – Wall Street Journal, 9/13/2023
- Titans of Silicon Valley are descending on Washington Wednesday to brief U.S. senators on artificial intelligence, in a meeting aimed at advancing nascent efforts to regulate the new technology.
- The closed-door all-senators’ session, organized by Senate Majority Leader Chuck Schumer (D., N.Y.), will feature Elon Musk, Mark Zuckerberg, Bill Gates and more than a dozen other executives and civil-society leaders.
- These tech bosses are already locked in a market-driven race to roll out sophisticated artificial-intelligence systems, especially generative tools that can quickly produce humanlike outputs.
- The Capitol Hill gathering gives them a chance to shape the priorities of lawmakers, some of whom are racing just as fast to place guardrails on AI development.
- Wednesday also might be the first time Musk and Zuckerberg find themselves in the same room following their called-off cage match.
- Assuming the tech leaders keep their fisticuffs in check, their previous comments suggest they will try to pull senators in different directions.
Fed Says Jefferson, Cook, Kugler Sworn In to Board Positions – Bloomberg, 9/13/2023
- The Federal Reserve said Philip Jefferson was sworn in as vice chair while Lisa Cook and Adriana Kugler took oaths as governors.
- Fed Chair Jerome Powell administered the oaths that took place at the US central bank’s headquarters in Washington on Wednesday, the Fed said in a statement.
- With Kugler now sworn in, the Fed board will have a full slate of seven members heading into its policy meeting next week.
- Jefferson — the fourth Black male governor on the Fed board — will be the second Black vice chair after Roger Ferguson.
- He was confirmed in a 88-10 vote last week.
- Cook — whom President Joe Biden named as a governor on the board last year and whose current term expires in January — was endorsed for a full term in a 51-47 vote on the same day.
- The Senate confirmed Kugler to the board in a 53-45 vote last Thursday, approving the central bank’s first Hispanic policymaker and capping a Biden administration diversity push at one of the world’s most powerful economic institutions.
Even Transportation Secretary Pete Buttigieg Can’t Find a Reliable EV Charger – Wall Street Journal, 9/13/2023
- America’s electric-vehicle drivers are increasingly unhappy with public charging, as problems that include glitchy or inoperable equipment seem to be getting worse, not better.
- Now the U.S. government plans to launch a $100 million effort to try to tackle the reliability issue and make public charging less annoying and more consistent.
- The funding aims to repair and replace thousands of old or out-of-commission chargers that are contributing to a roll-of-the-dice sensation among EV drivers, who never know what they might find.
- “Imagine what it would be like if you couldn’t be sure when you pulled into a gas station that you’d actually get gas out of it,” said Transportation Secretary Pete Buttigieg in an interview.
- “This is about making sure that access to charging is as reliable as access to fuel is today for gas cars, and we know that that’s not just a question of quantity but also one of quality,” he said.
Diesel Supply Strains Deepen While Trucking Demand Recovers in US – Bloomberg, 9/13/2023
- The US trucking industry appears poised for a rebound and that’s a bad omen for a diesel market already contending with some of the lowest stockpiles in more than two decades.
- Domestic freight demand is on the rise after touching a seven-month low in April, industry figures showed.
- Construction projects fostered by President Joe Biden’s stimulus programs also are boosting use of diesel-powered truck fleets, said Craig Fuller, CEO of data and price-reporting company FreightWaves.
- That means diesel consumption is set to rise at a time when domestic fuel stockpiles are languishing at the second-lowest seasonal levels since 2000.
- At risk are farmers who need diesel to harvest crops and homeowners who rely on its sister fuel, heating oil, to get through the winter.
- Diesel is so deeply embedded within manufacturing and transportation that its cost permeates the supply chain, and a price squeeze would almost certainly point to broader inflationary pressures in everything from groceries to electronics.
- Diesel futures already are trading near the highest level since January in New York, and the premium that near-term supplies are fetching relative to deliveries later this year is discouraging arbitrageurs from stowing fuel in storage tanks.
- Meanwhile, government analysts at the Energy Information Administration on Tuesday lifted their full-year 2023 forecast for distillates consumption — the category that includes diesel and heating oil — to 3.93 million barrels a day.
EUROPE & WORLD
Zara owner Inditex profit jumps 40% as price rises slow – CNBC, 9/13/2023
- Zara owner Inditex on Wednesday beat expectations with a 40% jump in half-year net profit despite the world’s biggest fast fashion company slowing the pace of its price increases.
- Inditex sales rose 13.5% to 16.9 billion euros and a gross margin of 58.2%.
- The group, which also owns Bershka, Pull & Bear and other brands, said sales at constant currencies between Aug. 1 and Sept. 11 were 14% higher than a year earlier, showing that the pace of summer sales continues as autumn collections start to arrive.
- With a big share of its costs in euros, Inditex said it expects currencies to have a -3.5% impact on sales this year, worse than the -2.5% impact it expected previously.
- The company posted a net profit of 2.5 billion euros ($2.7 billion) for the six months to July 31, outpacing a 2.38 billion euro market forecast according to data from LSEG.
- The retailer’s flagship brand Zara plans further store expansion in the United States, a market that two years ago became Inditex’s biggest after Spain.
- Worldwide Inditex reduced its stores to 5,745 from 5,801 in the second quarter, showing how the retailer has managed to increase sales while reducing space.
Arm Is Set for US IPO Pricing in Test to AI Hype, China Risk – Bloomberg, 9/13/2023
- Arm Holdings’s long-anticipated initial public offering is set to price Wednesday and investors will be watching to see how owner SoftBank Group fares in what is set to be the largest listing of the year — and whether it helps reignite equity capital markets.
- The IPO touches on an array of hot-button issues for tech investors, including potentially excess enthusiasm related to artificial intelligence, as well as geopolitical risks involving China and its role in the chip wars.
- The offering even includes the world’s most valuable semiconductor company, Nvidia, as a participant.
- If all goes well, the debut could boost the reputation of Masayoshi Son, SoftBank’s founder, chairman and chief executive officer.
- The participation of anchor investors, combined with the smaller float, could deter funds from flipping shares for a quick sale once they start trading on Nasdaq.
- If Arm’s listing and those by Instacart and Klaviyo go smoothly, others such as software company Rubrik and car-sharing platform Turo could follow, Bloomberg News has reported.
Panama Canal Says Traffic Woes Will Last Into Next Year – Bloomberg, 9/13/2023
- The operator of the Panama Canal said there’s no immediate prospect of relief from the drought that’s reduced water levels and snarled shipping and global supply chains.
- Panama Canal Administrator Ricaurte Vásquez Morales said Tuesday that abnormally high ocean temperatures, an unpredictable rainy season and the persistence of the El Niño weather phenomenon mean officials will have to continue restricting vessel traffic into 2024.
- It means the long waits bedeviling the canal are likely to continue through the months leading up to both Christmas and Chinese New Year, when it’s normally busiest.
- The number of ships moving each day through the canal has slipped to 32 from 36 because of declining reservoir levels.
- The backlog of ships waiting to enter the canal has spurred fierce bidding for open slots.
- The canal will need to maintain draft levels — the distance between the canal floor and the bottom of a ship’s hull— at 44 feet (13 meters).
- That’s enough for about 70% of the canal’s traffic.
- Officials may need to reduce the number of ships moving through the system to maintain those levels, Vásquez Morales said.
BP CEO’s Sudden Fall Puts Oil Major’s Strategy Back in Play – Bloomberg, 9/13/2023
- The abrupt resignation of BP chief Bernard Looney marks the loss of an executive who pushed for a transition to clean energy more aggressively than any of his industry peers, with mixed results.
- BP said Tuesday that the 53-year-old chief executive officer was departing after failing to fully disclose to the company board some of his past relationships with colleagues.
- Chief Financial Officer Murray Auchincloss will take the top job on an interim basis.
- Looney’s exit caps a tumultuous three years leading BP in its most radical strategy shift since John Browne transformed the company into a transatlantic giant by buying US rivals Amoco and Atlantic Richfield more than two decades earlier.
- From the North Sea to West Texas, Looney pushed BP into greener territory, with big bets on hydrogen and offshore wind.
- Without the architect of that pivot, the company’s direction is now in question.
Kim Jong Un and Vladimir Putin Meet at Russia’s Main Spaceport – Wall Street Journal, 9/13/2023
- Vladimir Putin and Kim Jong Un flaunted their burgeoning friendship at a summit, displaying a partnership between the leaders that unnerves the West over concerns that North Korea will provide munitions to support Russia’s war effort in Ukraine.
- Meeting Wednesday at Russia’s main spaceport, the two autocrats vowed greater cooperation on economic and security issues—and took aim at the U.S.-led global order.
- Putin promised assistance on North Korea’s satellite endeavors.
- Kim pledged an unbreakable bond with Moscow.
- Without mentioning any adversaries by name, Kim declared confidence in Putin’s ability to win the Ukraine war and create a stable environment for development, according to Russia’s state news agency TASS.
- The North Korean leader described the 19-month war between Russia and Ukraine as the “sacred struggle to punish the gathering of evil that claims hegemony and nourishes expansionist illusions.”
- The exchange occurred at the Vostochny Cosmodrome, located in Russia’s Far East and reachable to Kim by train.
- Kim and Putin strolled around the space facility, with Russian officials explaining how the country’s rockets get launched.
- But the talks led to no signed agreements.
H&M to sell second-hand clothes at London store – CNBC, 9/13/2023
- H&M plans to sell second-hand clothes and accessories at its flagship store in London from Oct. 5, as pressure increases on fast fashion companies to curb their environmental impact by encouraging the reuse and recycling of garments.
- With the European Union planning new regulation to crack down on textile waste in the bloc, H&M has said it is “part of the problem” and that the way fashion is produced and consumed needs to change.
- The “PRE-LOVED” womenswear collection, at H&M’s Regent Street store, will include garments from several other brands and designers as well as H&M group brands, which include Arket, Cos, Monki, and Weekday.
- It will be the second H&M store to offer second-hand clothes, after Barcelona which opened earlier this year.
- H&M also has an online second-hand offering in Sweden and Germany.
- The autumn-winter 2023 collection of the second-hand offerings will include metallic dresses and shirts, trench coats, and “trendy knits”, H&M said, with new items added every day.
- The garments will be sourced from Flamingos Vintage Kilo, a company that runs second-hand vintage clothes stores in Europe and the United States, and will be priced from 29.99 pounds ($37) to 189 pounds, H&M said.
- Chiang Kai-Shek became president of China. – 1943
- Republican Margaret Chase Smith of Maine was elected to the U.S. Senate, becoming the first woman to have served in both houses of Congress. – 1948
- The four-day revolt at the maximum security prison in Attica, New York, ended when state police and National Guardsmen stormed the facility. Forty-two people died. – 1971
- Israeli Prime Minister Yitzhak Rabin and PLO Chairman Yasir Arafat shook hands after signing an historic peace agreement. – 1993